Baird

April saw Baird’s team of technology analysts run the rule over the increasingly high-profile retail IT sector. Valuations in this area have surged in recent times, with Torex Retail and XN Checkout the main beneficiaries. Nevertheless, Ian Spence et al still believe ‘the sector is undervalued’ as a whole.

AIM-listed K3 Business Technology is held as a prime example. Although historically a software and systems provider to the manufacturing sector, Spence considers the recent acquisition of Alpha Landsteiner significant. Alpha, he argues, ‘is winning market share and shows signs of being able to deliver above-average growth’.

As such, Spence reasons the ‘shares look undervalued on a 12-month view’. And though soon-to-be-released 2004 figures will be far from inspiring, 2005 should see sales double to £17 million, guiding profits up to £1.3 million.

Also tipped as an ‘outperform’ is solutions software provider NSB Retail, which analyst Paddy Carter describes as a company with ‘the right products for the right markets’.

Despite market concerns, a major contract with US-retailer JC Penney has enabled the company to perform robustly in recent times. Risks remain, but with a £9.5 million profit anticipated this year and the shares trading on a prospective p/e of 11.7, Carter expects a brighter future.

He is less optimistic with regard to retail point-of-sale systems developer Anker, however, noting ‘the business suffered from under-investment’ and its focus on hardware will increasingly hinder it going forward. ‘The only compelling reason for investors to look at Anker at this stage is for a bid,’ Carter concludes.